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A new grants program will help not-for-profit organisations explore the “huge potential” of impact investment and attract investors.

The Impact Investment Ready initiative, launched Tuesday by Impact Investing Australia and Philanthropy Australia, will support not for profits with Discovery Grants, as well as for-purpose organisations with Growth Grants.

Philanthropy Australia’s Chris Wootton, who manages the Discovery Grant arm of the program, said impact investment was a significant opportunity for not-for-profit organisations to secure funding.

“It’s a much larger source of funds, it’s potentially 20 times what is available in grants.”

Impact investing is a growing field where investments are made into organisations and projects likely to produce positive social and environmental outcomes, along with a financial return.

It evolved in response to large and complex social challenges which can not be addressed or funded by government and philanthropy alone.

Grants of up to $50,000 will help not for profits prepare for impact investment.

“A lot of not for profits aren’t what we call ‘impact investment ready’,” Wootton said.

“[There’s] a gap in terms of not for profits either being able to identify what makes a good impact investment proposal or in actual fact they [don’t] have the capacity either internally or at the board to develop such proposals.

“So the aim of the grants is to build capacity of a not for profit to better identify and/or develop impact investing ready proposals… that’s the genesis of it.

“[With] the Discovery Grants… they could engage a third-party intermediary, someone with that expertise to work with the board and senior management, to actually help them identify proposals.”

The first-round funding pool of $500,000, with half supplied by NAB and half by funding partners, aims to support the sustainability of the sector.

“In order to address the social and environmental challenges facing Australia, we need a strong and vibrant not-for-profit sector with the capacity to develop and implement high-quality impact investing programs. The Discovery Grants aim to kick-start this process,” Philanthropy Australia CEO Sarah Davies said.

However, Wootton said many not for profits didn’t understand the potential of impact investment.

“There’s a whole range of… opportunities in terms of businesses, in terms of services, in terms of other products or things that they do where they would normally apply to government for a grant, or apply to philanthropy for a grant,” he said.

“It opens up a whole new set of funding. We all talk about a not for profit having a good funding mix, so they’re not over reliant on government funds, or they’re not over reliant on philanthropic funds.

“But it’s on a different basis. It’s got to be where there’s an income stream of some kind or at least there’s got to be some sort of return for the investor… and that return can be reduced, it can be a low-interest loan, it could be a zero-interest loan.”

He said the Discovery Grants were unlike anything offered in Australia, with existing programs focusing on individuals rather than organisations.

“There’s a whole lot of accelerator programs, a lot of the accelerator programs have been picked up by individual entrepreneurs but not by staff within not for profits,” he said.

“We think not for profits have the size and scale to be doing this, but also… the resources and the knowledge of what’s needed in society.”